Regulatory Benefits: Examining Agency Justification for New Regulations

January 8, 2013

Federal agencies justify their regulatory decisions based on their expected benefits. These claims provide support for action as the president and members of Congress work with the agency to meet their demands. A new study by Sherzod Abdukadirov, a research fellow at the Regulatory Studies Program at the Mercatus Center, focuses on the benefit claims rather than the actual measured benefits.

A regulatory report card was developed to measure the quality and use of regulatory impact analyses (RIA) in federal agencies by Mercatus Center scholars Jerry Ellig and Patrick McLaughlin. The report card scores the quality of regulatory analysis based on three categories:

  • Openness: How easily a citizen can find the analysis and understand it.
  • Analysis: How well it defines and measures the outcomes or benefits the regulation seeks to accomplish.
  • Use: How much the analysis affected decisions in the proposed rule.

According to the data, 83 percent of budget regulations fail to show what their benefits are and/or how they plan to accomplish them.

Abdukadirov finds that the RIAs fail on several measures, including:

  • Failing to show that the problem deserves attention from the federal government.
  • A failure to quantify the benefits of regulation.
  • A failure to show that the problem would not be solved in the absence of a regulation.
  • And in some cases, a lack of program theory or little evidence that proposed actions will lead to beneficial outcomes.

In the past, proponents of regulations have pointed to data from the Office of Management and Budget (OMB) showing how beneficial regulations can be. However, there are some flaws with this. Indeed, the OMB report only includes regulations with monetized cost and benefit estimates, which excludes data from a majority of significant regulations. In addition, it uses estimates from federal agencies which tend to overestimate both the benefits and costs.

Source: Sherzod Abdukadirov, "Regulatory Benefits: Examining Agency Justification for New Regulations," Mercatus Center, December 2012.

 

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